22/03/2012 World Business Report


22/03/2012

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latest headlines from BBC World news this morning. Time for World

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A warm welcome, you are with World Business Report. Here are the

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headlines: Brace for strike - Portugal's largest union vows to

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bring the country took a downturn in protest against austerity

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measures. Preparing for a slowdown - outputs

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in Chinese factories slows for a Portugal it is bracing itself for a

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general strike, the second since it negotiated a 78 billion euros bail-

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out last April. The protest is against sweeping austerity measures

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imposed in return for the financial aid. The industrial action is

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already affecting transport in the country. At the heart of the debate

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is the drive towards flexible and less generous employment terms

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which have come as a shock to almost 500,000 people in state jobs.

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Our correspondent has more. This is the working life many fear

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could be theirs if they do not try and defend what they have. This man

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works casual cafe shifts. Last month he took over 250 euros,

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leaving on a Jaguar is to live on after rent. His dream is to finish

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his studies, but the cafe it is closing due to lack of business. He

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is now looking for fruit-picking jobs overseas. I have sent e-mails

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to Denmark and other countries because they pay very well. My goal

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right now is to be able to survive. I am not exactly living, I am

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surviving. Meanwhile a response to the strike may show the degree to

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which ordinary Portuguese will accept these new realities. The

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largest union he can manage a show of strength, but it does not enjoy

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a wholesale support. By the unions have grudgingly accepted the need

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for things like a loss of holiday bonuses and more work flexibility.

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Two-thirds of voters had chosen parties that support the austerity

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measures. The politicians he exploited feelings of disillusion

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and despair. -- few politicians here. It is the next few months

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The strike in Portugal comes as fears grow that it will need

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another financial bail-out. The government has firmly denied that.

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The economy is expected to contract by 3.3% this year. Unemployment

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reaches record levels. We must be to an Economist. What is your

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outlook for Portugal? The jury is out, isn't it as to whether it will

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need another bail-out or not? the previous bail out, it was

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foreseen that Portugal would return to financial markets in 2013 and

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would be able to finance itself. If you look at what interest rates are

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doing right now. They are much higher than what they were four or

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Italy, Ireland or Spain. Financial markets are not convinced that

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Portugal will actually make it. It has a high public debt to GDP, its

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private sector is extremely high as well and there is an inflexible

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economy that needs to be reformed. The government is trying to tackle

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all three at the same time. Having said that, it is tackling it and

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many on the outside, including those who represent the union, said

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they are doing the best possible job they can to meet austerity

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measures. It seems that even though they are doing the best they can,

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it is very difficult with the Portuguese economy as it is for it

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to move on. That is absolutely right. First of all, Portugal is an

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extremely closed economy, C cannot rely on exports to help. If you

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look at the example of Sweden at the beginning of the 1990s, they

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also had a lot of public debt as well as private debt. First they

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reduced private debt through structural reforms. Then in the

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second phase they started to reduce the public debt. Portugal is trying

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to do everything at the same time, making it difficult. If you look at

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average GDP growth for world economy since 2002, Portugal is

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among the bottom three in the growth league worldwide. It does

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need to do something about its economic growth and it does need to

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carry out structural reforms. The only question is when we will

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actually see the results of these reforms? That is crucial to

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Portugal. In the next few months, as our correspondent said, we need

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to watch Portugal closely to see whether it will be heading for a

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second bail-out or whether it will manage to avoid that and be in a

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place where it can come back to the markets in 2013? Coming back to the

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markets in 2030 might be his dream eight difficult. -- 2013. I do not

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think that Portugal will go the same way as Greece. His political

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institutions are much more stable. Coming to the markets again might

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A survey measuring manufacturing activity in China is showing output

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shrinking for a fifth month in a row. The HSBC purchasing managers'

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index fell to 48.1. Any number below 50 indicates contraction. It

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is based UN data compiled from monthly replies to questionnaires

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to purchasing executives. The official figures will be released

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next week. We go live to Beijing to speak to an associate professor

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from a university's School of Economics. Give us your take on

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this latest news about what factories are doing it in China.

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The fact that they are still seeing a contraction. China's economy is

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in a slowdown. It has been in a slowdown since at least November.

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What these numbers are telling us is that it is across the board. A

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lot of people outside of China are focused on the negative impact of

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the eurozone crisis, declining demand from Europe and sluggish

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demand from the US on its exports from China. The numbers are telling

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us that it is part of the picture. Another part of the picture is a

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slowdown taking place within China, driven by domestic issues such as

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the severe downturn in property. There is also a lot of concern

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about mounting bad debt in the system and the impact that has on

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the ability to finance further growth. What would be of Verity's

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do about this. The Premier race at the promised economic fine-tuning

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to get China on a more sustainable growth path. Fine-tuning is the key

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word. I do not think that we will see what a lot of people on the

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market were to see, which is a big stimulus. One of the reasons is

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because one of the numbers in the index suggested that prices were

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not dropping, that inflation may not be raging, but it is persistent.

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Chinese authorities have to be concerned that if they pour money

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into the economy, they could see a spike in inflation. The other thing

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is do you really want to pour money into the economy to fund more empty

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buildings, more infrastructure projects that do not pay back, more

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overcapacity in steel and other industries? Not necessarily. Even

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though the markets might want to see that kind of growth, somebody

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taking a longer term perspective on the economy might see the downturn

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has a good thing. If it represents a real economic adjustment and not

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just more of the same. We'll leave it there, thank you for giving your

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take on what is happening in China. A lot of stories and economic news

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impacting the markets today. Normally when we hear news of

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contraction in China the markets get very spit about that. As you

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can see, they are fairly flat. South Korea is the only one slowing

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slightly. We did not see a huge reaction to that story, which is

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quite interesting. The dollar-yen always has an impact on the trade

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